Investing has never been easier than it is today due to the recent emergence of online financial companies. One company leading the charge is M1 Finance.
If you are looking for a company that offers fractional shares, no trading/management fees, a wide range of investment options, and simplistic design with great functionality, then M1 Finance is for you.
Regardless if you are a beginning investor looking to make your first dollar or a seasoned pro who likes the flexibility to choose their own holdings, I guarantee you will find value in M1 Finance.
Table of Contents
- Fractional Shares
- No Fees
- Many Investing Options
- Intuitive Platform
- Dynamic Rebalancing
- Automatic Investing
- Retirement Accounts
- Additional Features
What sets M1 Finance apart from other investing platforms is fractional share investing. This is ideal for companies you want to invest in that have high share prices. Apple for example is typically valued over $200 and while I really want to invest in Apple, I don’t want to have a large portion of my money tied up in it.
With M1 Finance, I can invest $1, $5, $10, or any amount into Apple and take the respective proportion of that share.
Why would you want a fractional share?
You get a piece of the pie! You may not get the whole pie but a piece is better than nothing.
Imagine you have a starting budget of $1000 to invest and want to diversify your holdings so all your cash isn’t tied to one company. With most investing platforms, you must invest enough to purchase an entire share. In the case of a $1000 investment, $200 is 20% of your portfolio in one stock which can be a high risk if it would suddenly crash.
With M1 Finance, however, you can invest $50 into Apple and select a wide variety of other stocks to invest in which ultimately reduces risk. A good rule of investing is not to keep more than 5% of your portfolio in one holding.
Fractional share investing is great for companies with a large share price because you can still ride the coattails of success. Another prime example is Amazon. I don’t have $2500 to purchase one full share but I do have $100. Fractional shares offer portfolio flexibility, and right now M1 Finance is the innovator for making that happen.
How do fractional dividends work?
Easy! You get the dividend relative to your proportion of the holding. If Apple pays $3.28 in annual dividends and you own 5%, you will get 5% of $3.28!
Expected dividend = # of Shares X dividend payment
To find how many shares of each holding you have in M1 Finance, simply click on the “holdings” tab on the top.
Once you know how many shares of a holding you have, head on over to Seeking Alpha and check the next dividend payout.
Multiply your number of shares by the next dividend payout to determine how much you will get. Companies typically pay dividends on a quarterly basis so you could also multiply your shares by the annual dividend amount and divide by 4.
What is better than investing for free? M1 Finance doesn’t charge investors for trading, maintenance, withdrawing or depositing.
No investing fees mean you have more money to reinvest back into your portfolio.
Let’s break down the benefits of no-fee investing. The fee for a financial advisor to do the work for you is usually around 1% of your holdings.
$1000 portfolio = $10 in fees
$10,000 portfolio = $100 in fees
$100,000 portfolio = $1,000 in fees
$1,000,000 portfolio = $10,000 in fees!
At first glance, 1% seems so minimal. However, when you factor in the opportunity cost of your 1% fees compounding year after year, the actual cost is much higher than 1%.
I assume your financial target is much higher than $10,000, but for simplicity, let’s say you have $10,000 and are paying the 1% fee of $100 per year. After 40 years your expenses are presumably $4,000.
Wrong! Your expenses are about $26,000, or about 6.5% averaged over 40 years with average long-term returns. Investing with M1 Finance alone can save you tens or even hundreds of thousands of dollars.
Use your limited time to it’s fullest potential. Take advantage of no-fee investing to build ultimate financial wealth.
How does M1 Finance Make Money?
M1 Finance makes money from primarily through three different methods:
- Interest from lending cash and securities.
- M1 Debit card interchange fees
- Membership fee for M1 Plus
Many Investing Options
Stocks, bonds, ETFs, and REITS are all fair game on M1 Finance. Mix and match your risk tolerance by selecting your desired amount of stocks and bonds. There are also ETFs from Vanguard, Invesco, BlackRock, and many more.
As per the standard practice, there are holding fees for ETF’s but these don’t come from M1 Finance, they come from the ETF firm itself. Vanguard for example charges holding fees for all their ETFs.
Choose Your Own Holdings
Part of the fun of investing is being able to choose your own holdings and see how they perform over time. Regardless of what investment strategy you have, M1 Finance lets you customize you portfolio to your liking.
Add any publicly-traded company and choose from thousands of stock and bond funds. I personally enjoy holding 100% stocks and 0% bonds because I am comfortable with the risk to reward ratio.
The cool thing about M1 Finance portfolios is how easy they are to share with other people. Take my current portfolio for example, sharing this pie is extremely easy because M1 Finance generates a link to share.My M1 Finance Portfolio
Expert Built Portfolios
If you are a beginner or don’t want to spend time choosing your own holdings, you can choose a portfolio that has already been created by financial experts. Low, moderate, aggressive, high-dividend, and high-growth options give you great flexibility to choose a portfolio that fits you.
Key performance metrics are always at your fingertips. When you log in you see the return on your portfolio, how many dividends you have earned, and a graph showing performance over time.
When it comes to money platforms, you want something that is easy to navigate and beautiful to look at, and fortunately, M1 Finance dominates in this field.
Organize Your Pies
M1 Finance is unique for offering pies. Pies are ways for you to organize your portfolio in structured and unique ways. I like to break my portfolio by pies based on industries. I organize companies into consumers, real estate, technology, and finance pies just to name a few.
Feel free to be creative and organize based on how you want.
Oh! Did I mention you can check your portfolio anywhere? Download the M1 Finance mobile application to check your portfolio whether you are on your front porch or walking the streets of Bangkok. *Affiliate link below.
The market moves in interesting ways which cause holdings to drift away from their allocated holding percentage. If you allocate Coca-Cola at 2% of your portfolio, it will become overweight when the share value increases and underweight when the value decreases.
In order to keep your portfolio from drifting out of your preferred allocation, you can choose to rebalance from time to time. M1 Finance makes this incredibly easy with the click of a button. You don’t want to do this too often, perhaps once or twice a year at most, but the option is always there.
It’s also important to note that every time you invest money, M1 will balance your portfolio with the deposit. If every month you invest $500 for example, that money will be allocated throughout your portfolio to keep it on track according to the allocation you set.
Want to invest a certain amount of money every month? You can easily do so by setting an automatic investing schedule. Investing money into your account on a consistent basis will make you more money in the long run, but more importantly, it will control your emotions.
With auto investing, your cash flow will become second nature and you won’t think about it too much. By not thinking, you won’t react the wrong way to market volatility. The key to successful investing is controlling your emotions.
Dividends can get automatically invested too. As long as you have over $10 in your account, M1 Finance will automatically invest it back into your portfolio if you choose.
At some point, you want to retire right?
IRAs can provide you the financial freedom you deserve when you finally hang up the cleats and M1 Finance is here to help. Invest your money in a traditional or Roth IRA with M1 Finance for FREE.
Almost all other IRA’s will charge a small percentage, but with a lot of money, even the smallest amount of fees can leave you with less money down the road. M1 Finance simply puts more money in your pocket with their IRA accounts. You can go ahead and roll over your existing 401k accounts too!
Apart from M1 Invest, there are three additional features M1 Finance offers.
Borrow money easily based on the value of your portfolio. M1 Borrow allows you to open a line of credit up to a maximum of 35% of your portfolio, as long as you have over $10,000 invested.
Currently, the interest rate for borrowing money is 3.5% but can be as low as 2% if you are an M1 Plus subscriber.
Open an FDIC insured checking account and receive a debit card with M1 Spend. Having a checking account with M1 allows you to integrate your cash flow easier with your portfolio.
M1 Spend checking account comes with all the features other firms offer with the added bonus of integration.
Bringing all the features of M1 Finance together, M1 Plus gives better rates and more flexibility across all other M1 features.
M1 Plus opens up a second trading window in the afternoon allowing investors to deposit and withdraw money so they don’t have to wait until the next day to initiate the trade.
Take your interest rate on M1 borrow from 3.5% to just 2% when subscribing to M1 Plus. As stated before, even 1% of savings can translate to massive savings in the future due to the magic of compound interest.
Lastly, M1 Plus gives M1 Spend users a 1% APY on their checking accounts. Considering the low-interest rates traditional checking accounts offer, this is actually a pretty good deal.
Drawbacks of M1 Finance
Although M1 Finance is my preferred investing platform, there are some drawbacks to mention. For starters, there is a $100 minimum to get started but I don’t consider this too much of a bad thing because if you are investing you are most likely to be investing way more than $100.
The biggest downfall is the limited trading windows. M1 executes trades one time per day at 10:00 AM (EST) meaning it isn’t a day trading platform. There is a 3:00 PM (EST) trading time as well exclusively for M1 Plus members. Apart from these M1 Finance is a solid platform that you should definitely consider if you are a long-term investor.
Is M1 Right For You?
If you plan to be a long-term investor who wants the flexibility to choose holdings and organize them efficiently then M1 Finance is the right fit for you.
While other platforms are really good and offer unique features, M1 Finance fits the strategy of a long-term investor. If you want to test your luck day trading crypto, you should check elsewhere.
Overall I think M1 Finance is a solid investing platform and the one I use because it fits my long-term investing strategy and offers fractional shares.
Signup Promotion (Get $10)
Signing up for M1 Finance is a quick and easy process. Simply go to the M1 Finance website and enter account information. If you click on the button below you can sign up using a referral link and get $10.Get $10 for Signing Up
Does M1 Finance Guarantee Returns?
No. M1 Finance as with any other form of investing doesn’t guarantee any sort of return. There is always risk involved and with this in mind you should do your due diligence.